Cotton prices continue to fall
September 17, 2001,
With the world supply of cotton — existing stockpiles plus production — far exceeding demand, cotton prices are approaching historically low levels — the lowest, in fact, in almost half a century — providing a big dose of good news to battered U.S. textiles producers.
The International Cotton Advisory Committee, a worldwide consortium of cotton-growing nations, reported in its September update that the global cotton supply "is expected to increase by one million tons, or 3.5 percent, to reach a record of 29.4 million tons in 2001/02." The increase is due largely to "a projected increase in production in the Northern Hemisphere by 9 percent, or some 1.6 million tons."
Given the spurt in growth, said the ICAC, overall world production in 2001/02 is now forecast at a record level of 20.8 million tons, beating a previous high of 20.7 million tons recorded 10 years ago. But at the same time, demand is expected to inch up just 1 percent, triggering a collapse in cotton pricing. Over the past 10 months, cotton prices have fallen by more than a third, or 35.6 percent, said ICAC, to a current level of 42.5 cents a pound from 66 cents in December of last year.
"Over the last 28 years, cotton prices have been lower only from June to mid-September 1986," said the global consortium of cotton growers. "Historically low prices are occurring despite the fact that world ending stocks declined for the third consecutive season to a six-year low of 8.6 million tons by July 31, 2001."
Summing up its outlook, the ICAC said, "International cotton prices will remain mired well below the long-term average for the fourth consecutive season in 2001/02. Supply and demand estimates suggest that the Cotlook A Price Index will average 47 cents per pound in 2001/02, 10 cents, or 20 percent, lower than in 2000/01, and the lowest since 1972/73. Prices were 42 cents per pound from 1952/53 to 1972/73, and the Cotlook A Index averaged 49 cents per pound in 1985/86."
WORLD COTTON SUPPLY AND PRICING FORECAST
(in millions of tons, except for cotton prices)
|1999/00 (actual)||2000/01 (proj.)||2001/02 (proj.)|
|Source: International Cotton Advisory Council (ICAC)
|Cotlook A Price Index||$0.57||0.47||0.50|
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